Highlights of the DR-CAFTA Implementation Bill (Part II)
On August 2, 2005 President Bush signed H.R. 3045, the "Dominican Republic-Central America-U.S. Free Trade Agreement (DR-CAFTA) Implementation Act" (Act) into law (Public Law (P.L.) 109-53). A Presidential Proclamation must still be issued to amend the tariff schedule for DR-CAFTA, etc.
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This is Part II of a multi-part series of summaries on the DR-CAFTA Implementation Act (Act) that will highlight the provisions of the bill, beginning to end. Part II focuses on provisions relating to DR-CAFTA's entry into force, the issuance of regulations, duty benefits, and the termination of Generalized System of Preferences (GSP) and Caribbean Basin Economic Recovery Act (CBERA) benefits, etc.
Conditions for entry into force of DR-CAFTA. Under P.L. 109-53, the President is authorized to provide for the DR-CAFTA to enter into force with respect to those countries (i.e., Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, and/or Nicaragua) that have taken the necessary measures to provide for the DR-CAFTA to enter into force for them (e.g., for their legislatures to approve DR-CAFTA).
(According to USTR sources, the U.S. does not have to wait for all six countries to take these "necessary measures" before the DR-CAFTA can enter into force for the U.S. Sources explain that only one or more such countries must have taken the "necessary measures," and the rest may join at a later date. (Press sources have indicated that Costa Rica, Nicaragua, and the Dominican Republic have not yet approved the DR-CAFTA.)
Issuance of initial regulations. P.L. 109-53 states that initial regulations necessary or appropriate to carry out the actions required by or authorized under this Act or proposed in the Statement of Administrative Action to implement the DR-CAFTA, shall to the maximum extent feasible, be issued within 1 year after the date on which the DR-CAFTA enters into force.
P.L. 109-53 further states that in the case of any implementing action that takes effect on a date after the date on which the DR-CAFTA enters into force, initial regulations to carry out that action shall, to the maximum extent feasible, be issued within 1 year after such effective date.
Proclamation authority for DR-CAFTA duties, duty-free treatment. P.L. 109-53 provides that the President may proclaim: (1) such modifications or continuation of any duty, (2) such continuation of duty-free or excise treatment, or (3) such additional duties as the President determines to be necessary or appropriate to carry out or apply articles 3.3, 3.5, 3.6, 3.21, 3.26, 3.27, and 3.28, and Annexes 3.3, 3.27, and 3.28 of DR-CAFTA.
GSP status for DR-CAFTA countries to be terminated.According to P.L. 109-53, the President shall terminate the designation of each DR-CAFTA country as a beneficiary developing country for purposes of Title V of the Trade Act of 1974 on the date the DR-CAFTA enters into force with respect to that country.
CBERA status for DR-CAFTA countries to be terminated, unless excepted. P.L. 109-53 states that the President shall terminate the designation of each DR-CAFTA country as a beneficiary country for purposes of CBERA on the date the DR-CAFTA enters into force for that country, with certain exceptions. The exceptions are:
ITC injury determination. Each country shall still be considered a CBERA beneficiary country under 212(a) of CBERA for purposes of 19 USC 1677(7)(G)(ii)(III) and 1677(7)(H)) regarding cumulation for International Trade Commission (ITC) antidumping and/or countervailing material injury and/or threat of material injury determinations.
(According to the statement of administrative action, these provisions preclude the ITC from aggregating (cumulating) imports from CBERA beneficiary countries with imports from non-beneficiary countries, when making these injury/threat determinations for CBERA beneficiary countries.)
Ethyl alcohol. DR-CAFTA countries, as specified country-by-country in paragraph 12 of Appendix I of the General Notes to the Schedule of the U.S. to Annex 3.3 of the DR-CAFTA, will be considered a CBERA beneficiary country for purposes of the specified tariff rate quota schedule for ethyl alcohol.
Conventions, etc. in DR-CAFTA countries. P.L. 109-53 also allows DR-CAFTA countries to retain their CBERA beneficiary country designation with respect to section 274(h)(6)(B) of the Internal Revenue Code of 1986 (26 USC 274(h)(6)(B)).
(The Statement of Administrative Action indicates that this IRS rule, which limits taxpayer deductions for expenses from attending conventions, seminars, or similar meetings abroad, would not apply to such events in CBERA beneficiary countries, if the countries meet certain tests, thus maintaining the status quo.)
DR-CAFTA is sometimes referred to as CAFTA-DR or CAFTA
H.R. 3045 available at http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=109_cong_bills&docid=f:h3045enr.txt.pdf.
Statement of Administrative Action available at http://www.ustr.gov/assets/Trade_Agreements/Bilateral/CAFTA/Transmittal/asset_upload_file816_7815.pdf.